Don’t Forget Your Online Wallet

by Mike DeBlasi | March 16, 2023 10:20 am

Financial disclosure under Family Division[1] Rule 1.25-A is a mandatory component of nearly every family law matter including divorce, legal separation, annulment, civil union dissolution, parenting, child support, alimony, modification, and contempt matters. The information an individual is required to disclose under Rule 1.25-A[2] is relatively straightforward and predictable and includes: personal and business tax returns, recent pay stubs, healthcare costs, financial, bank account, and credit card statements, and other financial information that provides a complete picture of each party’s assets, income, debt, and monthly expenses. The court system provides a helpful checklist and cover sheet[3] for Rule 1.25-A and detailed information about what parties must include.

One aspect that isn’t explicitly mentioned in the Rule (or the checklist) is payment services such as Authorize.Net, Venmo, PayPal, Google Pay, and Amazon Pay. Problems can arise when individuals either forget to include these accounts as part of their financial affidavit, fail to produce the related documentation, or intentionally attempt to use these accounts to hide income and assets.

How payment services are used

Payment services are essentially online wallets that can be used by individuals and business owners to send, receive, and hold money. Certain services require the user to accept a money transfer that, until acceptance, is held in a third-party account. Consequently, a user can be owed significant amounts of money but decide to delay acceptance to control when the funds hit the user’s account.

Although users can link bank and credit card accounts, Venmo, for example, issues QR codes, debit cards, and credit cards that allow users to send funds from Venmo directly to outside vendors without transferring them to a traditional bank account. Small business owners also use these accounts as an affordable way to manage their books. These services make it easy for independent contractors and sole proprietors to track and annotate customer payments, calculate expenses, and pay themselves appropriately.

Why payment services are so important to disclose

In most family law matters, payment services accounts are relevant for two crucial reasons:

1. Substantively, these accounts hold a plethora of information—including spending activity, income, business profits and expenses, current interests, and current asset values—while also serving as a simple vehicle to hold significant cash funds in the user’s account or a third-party account. They are arguably the tech version of “cash in the mattress” or the “suitcase buried in the backyard” that some divorce clients lose sleep over. Fortunately, they are much easier to identify, track, and monitor.

2. Procedurally, although the term “payment services account” is not expressly found in Rule. 125-A, these accounts are responsive to the Rule in five ways.

First, the account balances and any funds held in a third-party account for the party’s benefit must be disclosed on that party’s financial affidavit. Second, although not a traditional business accounting system, activity statements for these accounts are clearly business financial statements when used by the business owner as a profit and loss, balance sheet, and income statement and thus responsive to Rule 1.25-A, B.1(d). Third, although not traditional bank accounts, these accounts are clearly financial assets and responsive to Rule 1.25-A, B.1(i). Fourth, at least some payment services allow users to establish a credit card account, which is expressly noted in Rule 1.25-A, B.1(k), and, fifth, applications related to same in Rule 1.25-A, B.1(f).

Getting it right the first time

Attorneys or self-represented parties should make it part of their practice to inquire about payment services. When parties fail to disclose payment services accounts, they are not meeting their discovery obligations. Such violations can trigger sanctions or lead to a future modification action. Most egregiously, the failure to disclose these assets and any associated income on a financial affidavit constitutes perjury and may result in a civil action, with the possibility of treble damages and fee shifting under RSA 458:15-b.

The 1.25-A financial disclosure is an essential and required aspect of most family law matters. Ensuring completion by producing your own payment service information ensures compliance with your obligations and prevents further litigation. Confirming the existence of these accounts should be part of each party’s due diligence and can be crucial to ensuring an equitable resolution of your family law matter.

If you want to learn more about how to best approach any family-related legal issue, do not hesitate to contact us[4] for assistance.

About the Author: Nicole A. Forbes[5]

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Source URL: https://orr-reno.com/dont-forget-your-online-wallet/

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